“Our world is the world” is the title of this section. But Spanish reality is so absorbing which is usually imposed on much more relevant international events.
This week will not be like that for two reasons. A, Jerome Powell, the chairman of the Fed, the central bank of the United States, has said that its priority is no longer economic recovery but rather inflation. Two, the negotiations between Russia, the United States and NATO on the situation in Ukraine, whose borders for weeks have been surrounded by some 100,000 Russian soldiers, have failed. And both facts will affect us.
On Tuesday, Powell appeared before the Senate and made official the Fed policy change course. Since the beginning of the pandemic (March 2020), the objective has been to boost the economy by lowering interest rates to zero and buying bonds in the markets to inject liquidity and purchasing power. The American economy –and the stock markets– they reacted appropriately and therefore unemployment has fallen to 3.9%, which is considered almost full employment. The tradeoff is that prices have shot up in December to 7%, the highest level in the last 40 years.
Powell was clear: “The economy no longer needs or wants heavy aid. High inflation is becoming a threat to employment and the duration of the expansionary cycle.” The Fed is going to raise interest rates three or four times this year and not only will you stop buying bonds, rather, it is going to start selling them, which implies withdrawing money from the economy. We have to take some of the joy out of consumption and investment so that inflation returns to 2%. American stock markets have not panicked, but so far this year They are already in negative territory.
In Europe, the ECB still wants to believe that inflation is temporary and will be more cautious in stimulus withdrawal. But the German 10-year bond – which had to be paid to obtain it – has risen this week to -0.02%, on the verge of positive territory. And the Spanish bonus –with which we finance our large public deficit– it has risen from 0.3% to 0.6%. In 2021, our new debt cost us nothing (as if we were Germans), but this year is not going to be the same. The cost of debt is going to go up somewhat (good), or quite a bit (it would be bad). Spain will not be able to continue triggering the increase in the deficit. The party of softening the crisis with public spending is not going to end, but it will have to slow down.
It’s not about the Americans. Our CPI has ended the year at 6.5% (3.1% average). And the new president of the Bundesbak, faced with 5% inflation in the euro zone, has asked himself: “Is a policy of such low interest rates still adequate? And if it still is, for how long?”
And this brings us to Russia, because the spike in inflation is largely due to a brutal increase in the price of natural gas. And it may be that this increase is the consequence of a deliberate policy by Putin. Putin has said that the end of the Union of Soviet Socialist Republics (USSR) was a historical disaster. Y he thinks it not as a communist but as a nationalist who believes – among other things – that Ukraine should be Russia. Or his protectorate.
Now he demands that the US commit to that Ukraine will never join NATO and that the countries of its former orbit (Estonia, Latvia and Lithuania) see the presence of NATO troops limited. They are impossible demands and Josep Borrell, the international representative of the EU, he has gone to occupied Ukraine to explain it.
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But Putin plays hard. Russia says this week’s talks have been for nothing and is looming in the shadow of an invasion of Ukraine, like the one in Crimea in 2014. And he has three weapons: one, Europe is not a military union (Borrell fights for a minimum of a rapid intervention force of 5,000 men). Two, the European economy depends on Russian gas. Three, the American guarantee, NATO, which stopped Stalin, is not at its best. Biden’s America wants no conflict as the ignominious withdrawal from Afghanistan indicates.
it would be nice if Sánchez and Casado, in addition to fighting every day, which seems their reason for being, they will talk about what is happening outside of Spain. What happens in Ukraine will affect us.
Reference-www.elperiodico.com